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Fincash » Mutual Funds » Ultra Short Term Mutual Funds

Ultra Short Term Bond Funds

Updated on October 16, 2019 , 2131 views

Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.

Ultra SHort Term Bond Fund

Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).

Ultra Short Term Bond Funds Features

Fund Type

Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.

For Ultra Short Term Funds, the purchase happens on a (T+0) basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.

Exit Load of Ultra Short Term Bond Funds

Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.

Returns of Ultra Short Term Funds

The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).

Redemption Ultra Short Term Funds

In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.

Minimum Amount of Investment

The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).

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Investment Avenues of Ultra Short Mutual Funds

Ultra Short Term Funds are fixed income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.

Why Invest in Best Ultra Short Term Funds?

Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.

Taxation of Ultra Short Term Funds

In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.

However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.

Liquid Funds Liquid Funds Ultra Short Funds Ultra Short Funds
Class of Investors Individuals/HUF Corporate Individuals/HUF Corporate
Dividend Distribution Tax 27.038% 32.445% 13. 519% 32.445%
Short Term Capital Gains As per Income Tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates As per Income Tax Slab Rates

(Please note, investors are advised to consult their Tax consultant before taking any decisions)

Best Performing Ultra Short Debt Funds to Invest FY 19 - 20

Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)
Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹27.5857
↑ 0.01
₹19,7510.72.24.510.18.89.2
Aditya Birla Sun Life Savings Fund Growth ₹386.697
↑ 0.08
₹15,4210.72.14.49.17.88.4
BOI AXA Ultra Short Duration Fund Growth ₹2,358.41
↑ 0.34
₹3360.61.93.98.27.88.3
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Oct 19

1. Franklin India Ultra Short Bond Fund - Super Institutional Plan

To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments.

Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a CAGR/Annualized return of 9% since its launch.  Return for 2018 was 8.7% , 2017 was 8.2% and 2016 was 9.7% .

Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth
Launch Date 18 Dec 07
NAV (18 Oct 19) ₹27.5857 ↑ 0.01   (0.03 %)
Net Assets (Cr) ₹19,751 on 31 Aug 19
Category Debt - Ultrashort Bond
AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd
Rating
Risk Moderate
Expense Ratio 0.37
Sharpe Ratio 8.9
Information Ratio 3.39
Alpha Ratio 0.14
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 9.71%
Effective Maturity 7 Months 10 Days
Modified Duration 5 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
30 Sep 14₹10,000
30 Sep 15₹10,987
30 Sep 16₹12,058
30 Sep 17₹13,120
30 Sep 18₹14,109
30 Sep 19₹15,526

Franklin India Ultra Short Bond Fund - Super Institutional Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹209,201.
Net Profit of ₹29,201
Invest Now

Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19

DurationReturns
1 Month 0.7%
3 Month 2.2%
6 Month 4.5%
1 Year 10.1%
3 Year 8.8%
5 Year 9.2%
10 Year
15 Year
Since launch 9%
Historical performance (Yearly) on absolute basis
YearReturns
2018 8.7%
2017 8.2%
2016 9.7%
2015 9.7%
2014 10%
2013 10%
2012 10.3%
2011 9.4%
2010 5.9%
2009 6.1%
Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
NameSinceTenure
Santosh Kamath25 Oct 180.85 Yr.
Pallab Roy1 Jun 0811.26 Yr.

Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 31 Aug 19

Asset Allocation
Asset ClassValue
Cash14.88%
Debt75.06%
Other10.06%
Debt Sector Allocation
SectorValue
Corporate80.04%
Cash Equivalent8.32%
Government1.58%
Credit Quality
RatingValue
A37.96%
AA50.11%
AAA11.93%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Call, Cash & Other Assets
Receivables | -
10%₹1,986 Cr
Vedanta Limited
Debentures | -
4%₹787 Cr7,900
Vodafone Mobile Services Limited
Debentures | -
4%₹755 Cr7,990
DOLVI Minerals & Metals Private Limited
Debentures | -
4%₹701 Cr3,910
Renew Power Ventures Private Limited
Debentures | -
3%₹675 Cr6,740
JM FINANCIAL CREDIT SOLUTIONS LIMITED
Debentures | -
3%₹540 Cr5,400
REC LIMITED
Commercial Paper | -
2%₹463 Cr9,500
Indostar Capital Finance Limited
Debentures | -
2%₹441 Cr4,400
INDOSTAR CAPITAL FINANCE LIMITED
Debentures | -
2%₹391 Cr3,900
↑ 3,900
EDELWEISS COMMODITIES SERVICES LIMITED
Debentures | -
2%₹373 Cr7,500

2. Aditya Birla Sun Life Savings Fund

The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents.

Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.8% since its launch.  Ranked 6 in Ultrashort Bond category.  Return for 2018 was 7.6% , 2017 was 7.2% and 2016 was 9.2% .

Below is the key information for Aditya Birla Sun Life Savings Fund

Aditya Birla Sun Life Savings Fund
Growth
Launch Date 16 Apr 03
NAV (18 Oct 19) ₹386.697 ↑ 0.08   (0.02 %)
Net Assets (Cr) ₹15,421 on 31 Aug 19
Category Debt - Ultrashort Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.35
Sharpe Ratio 9.3
Information Ratio 0.32
Alpha Ratio 3.1
Min Investment 1,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 6.71%
Effective Maturity 5 Months 26 Days
Modified Duration 5 Months 12 Days

Growth of 10,000 investment over the years.

DateValue
30 Sep 14₹10,000
30 Sep 15₹10,932
30 Sep 16₹11,944
30 Sep 17₹12,869
30 Sep 18₹13,716
30 Sep 19₹14,963

Aditya Birla Sun Life Savings Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for Aditya Birla Sun Life Savings Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19

DurationReturns
1 Month 0.7%
3 Month 2.1%
6 Month 4.4%
1 Year 9.1%
3 Year 7.8%
5 Year 8.4%
10 Year
15 Year
Since launch 7.8%
Historical performance (Yearly) on absolute basis
YearReturns
2018 7.6%
2017 7.2%
2016 9.2%
2015 8.9%
2014 9.7%
2013 9.5%
2012 9.7%
2011 9.2%
2010 5.8%
2009 5.8%
Fund Manager information for Aditya Birla Sun Life Savings Fund
NameSinceTenure
Sunaina Cunha11 Oct 144.89 Yr.
Kaustubh Gupta15 Jul 118.14 Yr.

Data below for Aditya Birla Sun Life Savings Fund as on 31 Aug 19

Asset Allocation
Asset ClassValue
Cash46.48%
Debt53.52%
Debt Sector Allocation
SectorValue
Corporate55.51%
Government24.08%
Cash Equivalent19.61%
Securitized0.8%
Credit Quality
RatingValue
AA15.57%
AAA84.43%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
National Bank For Agriculture And Rural Development
Debentures | -
3%₹539 Cr5,350
↑ 5,350
Power Finance Corporation Ltd.
Debentures | -
3%₹467 Cr4,650
AXIS BANK LIMITED
Certificate of Deposit | -
3%₹443 Cr45,000
↑ 10,000
Rural Electrification Corporation Limited
Debentures | -
3%₹429 Cr4,263
Bharti Telecom Limited
Debentures | -
3%₹395 Cr3,500
LIC Housing Finance Limited
Debentures | -
2%₹322 Cr3,200
↑ 750
POWER FINANCE CORPORATION LIMITED
Debentures | -
2%₹308 Cr3,050
Power Finance Corporation Ltd.
Debentures | -
2%₹294 Cr2,900
6.35% Govt Stock 2020
Sovereign Bonds | -
2%₹291 Cr29,000,000
↑ 29,000,000
Clearing Corporation Of India Limited
CBLO | -
2%₹274 Cr

3. BOI AXA Ultra Short Duration Fund

(Erstwhile BOI AXA Treasury Advantage Fund)

The Scheme seeks to deliver reasonable market related returns with lower risk and higher liquidity through a portfolio of debt and money market instruments. The Scheme is not providing any assured or guaranteed returns. Further, there is also no assurance that the investment objective of the Scheme will be achieved.

BOI AXA Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 16 Jul 08. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.9% since its launch.  Ranked 9 in Ultrashort Bond category.  Return for 2018 was 7.6% , 2017 was 8% and 2016 was 9.1% .

Below is the key information for BOI AXA Ultra Short Duration Fund

BOI AXA Ultra Short Duration Fund
Growth
Launch Date 16 Jul 08
NAV (18 Oct 19) ₹2,358.41 ↑ 0.34   (0.01 %)
Net Assets (Cr) ₹336 on 31 Aug 19
Category Debt - Ultrashort Bond
AMC BOI AXA Investment Mngrs Private Ltd
Rating
Risk Moderately Low
Expense Ratio 0.65
Sharpe Ratio 8.92
Information Ratio 2.08
Alpha Ratio 0.34
Min Investment 5,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 6.28%
Effective Maturity 5 Years 5 Months 19 Days
Modified Duration 5 Months 1 Day

Growth of 10,000 investment over the years.

DateValue
30 Sep 14₹10,000
30 Sep 15₹10,918
30 Sep 16₹11,907
30 Sep 17₹12,900
30 Sep 18₹13,805
30 Sep 19₹14,934

BOI AXA Ultra Short Duration Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for BOI AXA Ultra Short Duration Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19

DurationReturns
1 Month 0.6%
3 Month 1.9%
6 Month 3.9%
1 Year 8.2%
3 Year 7.8%
5 Year 8.3%
10 Year
15 Year
Since launch 7.9%
Historical performance (Yearly) on absolute basis
YearReturns
2018 7.6%
2017 8%
2016 9.1%
2015 8.7%
2014 9.3%
2013 9.2%
2012 8.5%
2011 8.2%
2010 5%
2009 4.7%
Fund Manager information for BOI AXA Ultra Short Duration Fund
NameSinceTenure
Nitish Gupta5 Dec 180.57 Yr.
Amit Modani5 Dec 180.57 Yr.

Data below for BOI AXA Ultra Short Duration Fund as on 31 Aug 19

Asset Allocation
Asset ClassValue
Cash71.63%
Debt28.37%
Debt Sector Allocation
SectorValue
Cash Equivalent48.51%
Corporate35.66%
Government15.83%
Credit Quality
RatingValue
A8.22%
AAA91.78%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Avendus Finance Private Limited
Debentures | -
9%₹26 Cr2,600,000
MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED
Debentures | -
8%₹25 Cr2,500,000
↑ 2,500,000
NATIONAL HOUSING BANK
Debentures | -
8%₹25 Cr2,500,000
INDUSIND BANK LIMITED
Certificate of Deposit | -
8%₹25 Cr2,500,000
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
Certificate of Deposit | -
8%₹24 Cr2,500,000
ICICI Bank Limited
Certificate of Deposit | -
8%₹24 Cr2,500,000
↑ 2,500,000
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
Commercial Paper | -
8%₹24 Cr2,500,000
Bank Of Baroda
Certificate of Deposit | -
8%₹24 Cr2,500,000
Export-Import Bank Of India
Certificate of Deposit | -
8%₹24 Cr2,500,000
INDIAN BANK
Certificate of Deposit | -
8%₹24 Cr2,500,000

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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